Singapore

ONLY 9.8 per cent of firms polled by KPMG say they are most concerned with improving productivity this year - even with the government's exhortations to firms to redouble their productivity efforts.

Describing the situation as worrying, KPMG head of tax Tay Hong Beng said that firms are far more concerned with tackling immediate business issues, such as rising rental and labour costs. Indeed, 40.9 per cent of respondents cited this as their most pressing operational issue over the next 12 months.

The findings were gleaned from KPMG's Pre-Budget 2015 Poll released on Wednesday, which was conducted in the fourth quarter of last year and supported by the Association of Small and Medium Enterprises (ASME), CPA Australia and the Singapore International Chamber of Commerce (SICC). It garnered responses from 203 respondents comprising 55 SMEs (small and medium-sized enterprises), 86 large Singapore companies, and 62 multinationals.

As for structural issues, 48.3 per cent of respondents said that global economic uncertainties were the largest concern, while 34.5 per cent cited workforce productivity and foreign worker dependence instead.

Responding to the findings, CPA Australia's Singapore general manager, Melvin Yong, said that companies have their priorities skewed, while SICC chief executive Victor Mills said that improving productivity should be the first concern for businesses over the next 12 months.

Stressing that restructuring efforts - especially the Productivity and Innovation Credit (PIC) scheme - must be finetuned to produce results, Mr Mills said: "We are so fortunate in this country to have the financial resources to (help firms restructure), but we can't fritter them away by a scattergun approach . . . We have to be more targeted as the one-size-fits-all (approach) doesn't work."

To that end, KPMG's Mr Tay recommends tiering the PIC scheme to promote productivity adoption in the first three years, and innovation and internationalisation in the next five years. This, he says, would boost the scheme's efficacy and sustainability in the long-run.

"We cannot keep extending the PIC scheme on a broad basis perpetually - that just distorts the economics of doing business," said Mr Tay, advocating a more nuanced and firm-specific approach.

KPMG suggests that for the first three years, higher cash payout limits and the flexibility to combine PIC caps across productivity-driven activities can be considered.

In the five years after this, support for the innovation side of things should come into focus. This includes internationalisation activities - such as market feasibility studies and brand development efforts - and the flexibility to combine PIC caps across innovation-driven activities, such as intellectual property registration and acquisition.

Describing KPMG's recommendation as innovative, Ang Yuit, vice-president for membership and training at ASME, said that such a tiered scheme would "force (SMEs) to think of (productivity and innovation) in terms of a three and five-year plan".

Mr Ang added that more can be done to support SMEs in their innovation efforts: "If an SME comes up with a system that improves processes, it should be recognised as R&D because that constitutes something that would really drive productivity. R&D isn't just about science & technology projects that involve laboratories and test tubes."